IDEAS, INTERESTS AND INSTITUTIONS IN POLICY CHANGE:TRANSFORMATION OF INDIA'S AGRICULTURAL STRATEGY IN THE MID-1960S

Ashutosh Varshney ,- o

October 1988

IDEAS, INTERESTS AND INSTITUTIONS IN POLICY CHANGE:

TRANSFORMATION OF INDIA'S AGRICULTURAL STRATEGY IN THE MID-1960S

Ashutosh Varshney

Acknowledgements: For comments on an earlier draft and other discussions, I am

grateful to Suzanne Berger, John Mellor, Lance Taylor, Peter Timmer and Myron

Weiner. The usual disclaimers apply.

CONTENTS

I.1 INTRODUCTION

I.2 THE POLITICAL CONTEXT:

Changing Institutional and Ideological Parameters of Economic Policy

1.3 CHANGE IN AGRICULTURAL POLICY

1.3.1 Subramaniam's Agrarian Model

1.4 BATTLE FOR POLICY CHANGE: STRUGGLE WITHIN THE STATE INSTITUTIONS

1.4.1 Logic of Intrabureaucratic Politics

1.4.2 Towards an Empirical Account

1.4.2.1 Conception: Putting Ideas & Institutions in Place1.4.2.2 Struggle for Party Support and Financial ResourcesT.4.2.3 Resolution of the Struggle and Policy Implementation

1.5 DID THE INDIAN STATE ACT AUTONOMOUSLY?

1.5.1 Role of External Actors

1.5.1.1 The World Bank1.5.1.2 The U.S. Government1.5.1.3 Ford and Rockefeller Foundations

1.5.2 Rural Society and Public Policy

1.6 CONCLUSIONS

IDEAS, INTERESTS AND INSTITUTIONS IN POLICY CHANGE:TRANSFORMATION OF INDIA'S AGRICULTURAL STRATEGY IN THE MID-1960S

I.1INTRODUCTION

An acute crisis marked India's food economy in the mid-1960s. Two

successive droughts during 1964-66 brought food production down to the level of

1956-57, creating near-famine conditions and leading to doomsday predictions

about India's economic future. According to many in the West, this was the

beginning of India's long famine, something akin to what one normally hears about

the Sub-Saharan Africa these days. Using an analogy from the battlefield, one of

the "popular" books of the mid-1960s argued that those wounded in the battlefield

were of three types: the slightly wounded who could be cured with small degrees

of medical attention, the more seriously wounded who required surgery but could

be saved, and those so seriously wounded that they were generally left to die for

it was pointless to attend to them. India belonged to the third category: "no

matter how one may adjust present statistics.. .it will be beyond the resources of

the United States to keep famine out of India during the 1970s". 1

Between 1967-68 and 1970-71, however, India's food output rose consistently

upward. In 1965-66 and 1966-67, India's food output was 72.3 and 74.2 million

1 William and Paul Paddock, 1967, Famine 1975! America's Decision: Who WillSurvive?, Boston: Little Brown. The citation is from p. 217.

1

tons respectively; in 1967-68, food production touched 95 million tons and by

1970-71, it was 108.4 million tons, one and a half times higher than the output

achieved in 1965-66. India's public foodgrain reserves, almost wholly dependent

on 10 million tons of American wheat supplied under Public Law 480 in 1965-66,

had 8.1 million tons of domestically procured supplies in 1971. In the same

year, India unilaterally terminated the imports of PL 480 wheat from the US.

Still later, by 1986-87, public stocks of foodgrain soared to 30 million tons.

Largely as a result of these stocks, the drought of 1987-88, one of the worst in

the century, did not lead to a famine.

Though some gaps continue to mar the performance of the food economy2 ,

increases in food production over the last two decades and India's ability to

feed itself are, on the whole, economic achievements that few had thought

possible in the mid-1960s. Of particular note has been the source of output

increase. Though, at 2.7 per cent per annum, the trend growth rate of foodgrain

production between the mid-sixties and 1985-86 has been the same as between

independence and the mid-sixties, yield increases have been the primary source of

output increase after the mid-sixties, as opposed to acreage expansion which

largely accounted for production gains before that. With the expansion of arable

land virtually exhausted by the mid-sixties, production, in the absence of yield

increases, would have remained stagnant as it indeed had between 1960/61-1966/67.

Since population was growing at 2.3 per cent per annum, stagnation in food

production would clearly have caused enormous difficulties for the Indian economy

2 Output of only some crops, though they turned out to be the criticalones, has increased, not that of the entire agricultural sector. Also,production may have gone up but problems of distribution continue to be severe.

2

and polity. In some ways, the disaster averted has been a bigger achievement

than the output increase.

What accounts for India's agricultural turnaround? A decisive shift in

public policy - or, put another way, a change in the form of state intervention

in the agricultural economy - is by now widely accepted to be the main reason.

Between 1947-64, India had an institutional strategy that emphasized land reforms

and cooperatives in agriculture. Over a period of three years between 1964 and

1967, India's agricultural strategy was fundamentally changed, from one that was

based on institutional reorganization of agriculture to one that accepted the

existing institutional structure as given but sought to increase production

through price incentives and a change in India's technological base in

agriculture.

This paper analyses the political economy of policy change in the mid-

sixties. The central question addressed is: What forces led to the change in

state behavior? The wider relevance of the question is worth briefly stating.

The two dominant modes of analysis in political science, liberal and

Marxian, at least in their pristine form, have had a tendency to look for

changes in the power relationships at the level of society and "read off" changes

in state behavior from them.3 Despite their differences, both in liberalism and

Marxism, men and institutions at the top levels of formal power are not factors

3 Based on a larger discussion in Chapter One of my doctoral thesis,"Limits to Power: Agrarian Producers, the State and Food Policy in India',Department of Political Science, M.I.T, being completed shortly. Arecapitulation of the central tendency of theories is presented here, not thevariance around them.

3

that can determine state behaviour in critical ways. The civil society (interest

groups or classes, and competition or contradictions between them) provides the

critical parameters; leaders, state institutions and ideologies of leaders can

influence the behaviour of the state, but basically within these parameters.

Since the late seventies and early eighties, the theoretical comfort and purity

of these positions has been challenged by empirical work.4 An alternative theory

of the state has not emerged but state-centric research and emphasis on

institutions has by now returned.5

The concern with policy change is not simply academic. Since the onset of

the 1980s, the international development agencies, such as the World Bank and

USAID, have been somewhat preoccupied with the problem of policy change. Public

policy, they believe, is critical to economic development. Policies respecting

the market mechanism can quicken development as East Asia, according to the World

Bank, clearly shows. Contrariwise, bad economic policies, particularly those

tampering too much with the market mechanism, can halt development, as the

agricultural performance of many countries in Sub-Saharan Africa illustrates.

Yet, years of policy advice and policy dialogue, says the Bank, have not led to

desirable policy changes in many countries in Sub-Saharan Africa. What

"interests" impede the implementation of good "ideas" in some countries while

they go through in others, what "institutions" block "getting policies right" in

some, but not in others: these are the key pieces of a puzzle that the

4 For a listing of these works, see Theda Skocpol's introduction in Peter

Evans, D. Ruecshmeyer and Theda Skocpol, 1985, Bringing the State Back In,Cambridge: Cambridge University Press.

5 For a recent exchange on the state and political institutions, see the"symposium on the state" in American Political Science Review, September, 1988.The symposium features, among others, Gabriel Almond and Eric Nordlinger.

4

international development institutions would like to solve.6 Whether or not one

agrees with the World Bank on the substance of its policy advice, there is no

denying the fact that empirical studies of policy change that might provide

cognitive guideposts are few and far between. 7

Set against this backdrop, this paper chronicles the main contours of the

state-society interaction that went into the making of a fundamental

transformation in India's agricultural policy in the mid-1960s. Briefly, my

argument is that the primary sources of policy change lay within the state; the

societal inputs - in terms of ideas or organized interests pressuring the state -

were minimal. Ideologies of state leaders, their interests, and the

institutional specificities of the Indian state decisively shaped the policy

transformation.

The argument is developed as follows. Since the policy originated in the

state, I first "get inside" the state institutions and ask: Who made policy, with

what institutions, what allies, what ideas and what motivations? Then, I take

the next step and ask: What forces outside the state were involved with, or

affected by, the decisions of the state? Were those affected also the authors of

those decisions? Moreover, did these forces emerge from within India's civil

society or from the international system? Both documentary evidence and

extensive interviews with decision makers - in the manner of "oral history" - are

6 See World Development Report 1986, New York: Oxford University Press forthe World Bank, especially Part II.

7 Two exceptions that come to mind are Chalmers Johnson,1982, MITI and theJapanese Miracle, Stanford: Stanford University Press, and Francine Frankel,1978, India's Political Economy, 1947-1977, Princeton: Princeton UniversityPress.

5

used as building blocks for the argument. In and of themselves, documents of

state policy in India can be confusing. Once supplemented with interviews of

policy makers, they begin to make sense.

I begin with the political context of the mid-1960s and the content of the

"new agricultural strategy". This is followed by a detailed analysis of the

questions listed above.

1.2

THE POLITICAL CONTEXT:

Changing Institutional and Ideological Parametersof Economic Policy

The origins and evolution of India's economic policy from independence to

the mid-sixties can be analysed in terms of two types of "policy actors" -

political leaders, particularly those of the ruling party, and bureaucrats,

particularly those in the Planning Commission. The political leadership provided

the design; the planners fashioned the details of the design. Political leaders

operated with two sets of considerations - ideologies and interests. Decision

makers in the economic bureaucracy operated with the economic theories of the

time and, one should also suppose, with a regard for what could preserve or

expand their newly created power under Nehru. The dominant economic theory of

development in the 1950s - with its emphasis on planning, the industrial "big

push" driven by public investment in capital goods, and institutional change in

agriculture - meshed well with a Fabian socialist world view of the political

leadership, just as the dominant Keynesian economic theory of the 1950s mingled

neatly with a social democratic political design in the West.

6

The ruling Congress party, however, did not have a unified economic

philosophy. Factional conflicts within the ruling Congress party were inter alia

over economic designs for the country. Nehru's institutional view of agriculture

was shared by the left of center faction in Congress. Emphasizing land reforms,

cooperatives, and political institutions of local self-government (called

panchayats), the institutional view of agrarian transformation dominated policy

making under Nehru. Nehru, leading the left of center faction, dominated the top

levels of the party organization and the government. The left view was, however,

resisted by the right of center faction that had greater control over the

organizational wing of the party at the state and lower levels. Not

inappropriately, these latter leaders were also called the "state bosses".B

They were opposed to what they viewed as a pernicious attempt at ushering in

Communism in India through land reforms and cooperatives - an attempt, they

thought, Nehru orchestrated with the help of intellectuals in the Planning

Commission.

A side-effect of this struggle was that many of Nehru's opponents were

resentful of the power given to the Planning Commission over economic policy.

The Planning Commission was presided over by the Prime Minister himself and its

members, not elected by the people but nominated by the leader, were given

ministerial and quasi-ministerial ranks. The conflict inside the state

institutions - particularly between the Planning Commission and the Food and

8 The important leaders of this faction and their respective states were:Morarji Desai, Gujarat; Atulya Ghosh, West Bengal; Sanjiv Reddy, Andhra Pradesh;S. Nijalingappa, Mysore; S.K. Patil, Maharashtra; and C.B. Gupta, Uttar Pradesh;and Mohan Lal Sukhadia, Rajasthan. They were powerful in their respectivestates but, except for Morarji Desai, their national stature was limited.

7

Agriculture Ministry - and the conflict within the ruling party - between the

left of the center that dominated policy making in New Delhi and the right of the

center that had substantial control over the party organization at the state and

lower levels, and which therefore affected policy implementation - is essentially

how one can best describe the institutional and ideological outlines of India's

power map in the 1950s and early sixties.

An immediate consequence of Nehru's death in 1964 was that the institutions

and men that made economic policy, and the ideology that underlay their

functioning, changed significantly. It was a brief moment of change since

Shastri, Nehru's successor in June 1964, himself did not live beyond January

1966. But in a matter of 18 months, decisive shifts in India's economic policy

took place.

Why was Shastri chosen by the Congress party to replace Nehru and what

policy impact did it have? A widely accepted reading of the event is that the

potential candidate from the right of the center - Morarji Desai (who eventually

became Prime Minister in 1977) - was unacceptable to the left of the center.'

At the same time, Desai was also considered too independent by other important

members of the right of center faction. Shastri was chosen because "minimax", as

it were, was the dominant strategy of the main actors: compared to Nehru, he was

not "tall" but he was known enough in the party to be presented as a head of the

government and weak enough to considered malleable by the organizational

' For details, Francine Frankel, 1978, India's Political Economy, 1947-1977, Princeton, NJ: Princeton University Press, pp. 243-45.

8

stalwarts. Moreover, Shastri was uncontroversial enough to be acceptable to both

groups.

Once elected, however, this background determined Shastri's political

maneouvres. Two facts stood out: compared to Nehru, a relatively small political

stature and a thin ideological anchorage. The former meant that he had to build

his power, the latter that his key bureaucratic appointments were of an amorphous

kind, not driven by considerations of ideological conformity. Nehru's political

pluralism notwithstanding, his top bureaucratic personnel, particularly those he

appointed to the Planning Commission, shared his Fabian socialistic world view --

personnel such as V.T. Krishnamachari, Professor Mahalanobis, Tarlok Singh and

Gulzarilal Nanda. 10

In matters of economic policy, these two facts came together in a remarkable

but quiet assault Shastri launched on the Planning Commission. He redefined

procedures and administrative rules concerning the top economic bureaucracy of

the country. First, the tenure of the members of the Planning Commission was

made fixed-term; under Nehru, they were supposed to enjoy an indefinite tenure.

Second, the office of the Cabinet Secretary - the top bureaucratic office in the

country to which secretaries of all the ministries were responsible - was de-

linked from the Planning Commission; under Nehru, the Secretary of the Planning

Commission also served as the Cabinet Secretary, which gave the Commission a

unique position in the bureaucracy. And finally, Shastri created a Prime

10 Of these, two members have written extensively about their economicphilosophies: P.C. Mahalanobis, 1961, Talks on Planning, New York: AsiaPublishing House and Calcutta: Statistical Publishing House; and Tarlok Singh,1969, Towards an Integrated Society, New York: St. Martin's Press.

9

Minister's Secretariat with its own team of experts on policy. A Prime

Minister's secretariat had two important political effects: on economic policy,

it weakened the supremacy of the Planning Commission; and on policy matters in

general, it created an alternative source of policy advice, reducing Shastri's

dependence on the Cabinet where some of the powerful state bosses were present as

Ministers. As argued by Frankel, creation of this new institution introduced a

quasi-Presidential feature in a parliamentary form of government. 1 1 It increased

the power of the Prime Minister's office over all other offices in the country.

A strong man like Nehru did not need such bureaucratic strenghtening; his

charisma and political stature ensured that de facto. A weak man like Shastri

had to ensure it de jure.

The ideological amorphism of Shastri had significant effects, too. As his

Principal Secretary, the head of the P.M.'s Secretariat and, therefore, the top

bureaucrat in the country, Shastri appointed L.K. Jha, a senior civil servant and

a trained economist who was more inclined towards the market mechanism than was

customary for economic bureaucrats in India at that time. At the same time,

however, Shastri did not fundamentally change the composition at the Planning

Commission. Ashok Mehta, appointed the head of the Planning Commission under

Nehru in 1963 and a respected socialist thinker, continued to hold his position.

However, since the authority of the Planning Commission had been greatly reduced,

the view prevailing in the Prime Minister's office became more decisive in the

conduct of economic policy. The amorphous ideological setting and political

flux created an opening for a policy battle that, in the past, was always

overwhelmed by Nehru's ideological certitude and political stature.

11 Frankel, op cit, p. 251.

10

Shastri, like his predecessor, might not have been a leader with a powerful

ideological vision but he did have instincts and predilections which were an

additional and powerful factor in the new political and ideological set up.

Compared to Nehru, he had greater political experience of party functioning at

the state and local levels and moreover, in contrast to Nehru's urban

aristocratic and Oxbridge background, Shastri had rural origins.12 The way this

context influenced the policy parameters is interesting. Because of his

political stature and ideology, Nehru thought he could change India; Shastri, on

the other hand, had to work towards his own political consolidation rather than

towards changing India by championing deeply held policy designs but - and this

is critical - if the policy struggle was more or less evenly matched, he as Prime

Minister could tilt the scales. Shastri's instincts and predilections, thus,

could be decisive in situations of stalemate and near stalemate. As we shall see

below (sections 1.3 and 1.4), this indeed turned out to be the case.

1.3

CHANGE IN AGRICULTURAL POLICY

If Nehru was the inspiration behind India's institutional strategy, C.

Subramaniam, India's Food and Agriculture Minister between 1964 and 1966, was the

architect of policy change. A politician who had developed a reputation for

12 Shastri's positions can be inferred from interviews with his associates

and from his actions and cryptic statements. In my interviews, C. Subramaniam,Shastri's Food Minister, and L.K. Jha, his Principal Secretary, made claims about

his rural origins influencing his economic perspective. Details of these

interviews figure later in this chapter. More evidence is available in Frankel,op cit, pp. 246-249.

11

efficient administration in the state politics of Tamil Nadu and for emphasizing

the role of science and technology in policy, Subramaniam was brought to New

Delhi in 1962 by Nehru himself. Nehru made him the Minister of Steel and Heavy

Industries, a Ministry central to Nehru's industrial strategy and one where

Nehru especially valued technocratically inclined colleagues.

Upon Nehru's death, the first personnel decision made by Shastri was to

invite Subramaniam to head the Food and Agriculture Ministry. Once in charge of

the Food Ministry, however, Subramaniam saw the same connections between science

and agricultural production as between science and steel production. He also saw

economic production inextricably linked to economic incentives. Building up on

these two planks - one scientific, the other economic - Subramaniam provided a

powerful rationale for an alternative policy design.

Subramaniam did not, however, singlehandedly bring about the

transformation. His task was facilitated by the new political and ideological

constellation: the taming of the Planning Commission and the rise of the Prime

Minister's Secretariat; the change in the power balances within the Congress

party, reflected, most of all, in the rise of the state bosses after Nehru's

death; the ideological shifts toward a right of the center view accompanying

these changes in the institutional and power balances; and, finally, the pro-

rural instincts of the Prime Minister.

12

1.3.1 Subramaniam's Agrarian Model 1 3

Subramaniam's agrarian model can be divided up in three components: the

economic, the technological and the organizational. The economic component

consisted in the view that price incentives would motivate farmers to produce

more since it would be profitable to do so. Technology was required since

acreage expansion had reached its limits, making production increases dependent

on yields per acre. And organizational effort was needed because in order for

the first two components to work, institutions had to be created for determining

what the level of prices should be and how to implement them. Also necessary was

a research and administrative structure that would generate or adapt appropriate,

yield-increasing technologies and transmit them to farmers. Let us look at each

element in detail.

Price Incentives. The first paper Subramaniam prepared for the Cabinet was

on price policy.1 4 Subramaniam explains his understanding of the role of prices

in production and how it evolved:

"My move from steel and heavy industries to agriculture was a big change asfar as the nature of the work and job was concerned, but perhaps this initself was an advantage because I was able to look at agriculture with a

13 I have abstracted Subramaniam's model from two books and my own interviewwith him in Madras, December 14, 1984. Having more or less similar titles, thesetwo books offer different ways of getting inside the world of policy. The firstbook, A New Strategy in Agriculture: A Collection of the Speeches by C.Subramaniam (New Delhi; Indian Council of Agricultural Research, 1972), is avolume that puts together his speeches during his tenure as a Food Ministerbetween 1964 -1966. The other volume, called The New Strategy in Agriculture(New Delhi: Vikas, 1979), reproduces the lectures Subramaniam gave at theAustralian National University in 1978. In the second book, Subramaniam offersimportant insights into the political battles over policy whereas the earliervolume was more a statement of intent. I shall refer to the first book asSpeeches and the second as The New Strategy.

14 The New Strategy, ibid., p. 5.

13

completely new perspective. For example, in industry, no industrial unitcan progress and succeed unless it is a profitable concern. If it is alosing concern, no industry can prosper. I looked at agriculture from asimilar point of view and, after study and analysis, came to the conclusionthat Indian agriculture was a losing concern for the farmer. He did notreceive a return commensurate with his labour, or with the investment he wasprepared to make. This was mainly because of the price policy which hadbeen adopted since independence.... ."15

Contrast this with Nehru's position.16 Nehru also considered food prices

important but for reasons of planning and industrial production, not for food

production: ".. next to food production, the question of foodgrains is of vital

importance... If the price of foodgrains goes up, then the whole fabric of our

planning suffers irretrievably."17

Subramaniam, like Nehru, was conscious of the need for keeping food prices

in check but keeping the consumer price of food in control, according to him, was

not equal to keeping the producer price down. The solution for the problem of

high food prices, instead, lay in achieving long run increases in food

production -- for which price incentives to producers were necessary in the first

place.18 The required cycle, therefore, was first increasing production via

raising producer prices, with higher production eventually leading to a lowering

of consumer prices.

15 Ibid., p.4.16 Chapter One of my thesis examines the details of Nehru's institutional

view. "Limits to Power", op. cit.17 Fortnightly Letters to Chief Ministers, 1948-63, Delhi: Nehru Memorial

Museum, August 1, 1957.18 Speech delivered at the State Chief Ministers' Conference, called "A

National Distribution-cum-Price Policy", June 24, 1964, New Delhi, reproduced inthe Speeches, op. cit., p. 187.

14

Saying that producer incentives had to be the basis of a long-run production

policy, however, was not enough. What the incentive levels should be, how they

would be implemented and what impact producer incentives would have on consumer

welfare was also to be clearly thought through:

"The main problem in settling the price policy in a developing country is tokeep the consumer interests in mind. An affluent country can afford to keepits consumer prices of foodstuffs relatively high; the average level ofincomes is high and individuals spend relatively smaller parts of theirincomes on food. But in a poor economy like ours, the consumers spend asubstantial part of their incomes on food, and high food prices createcomplications in the economic situation. At the same time, the farmer liveson the very margin of subsistence and he has also to pay high prices formost of his inputs. We have, therefore, to reconcile the dilemma ofcompensating the farmer adequately and maintaining a reasonable price levelfor the consumer....... ."19

For this formula to work, in addition to food subsidies, two institutions

were also needed: one that calculated what prices were reasonable to producers

and one that bought up surpluses from producers at those prices. When excessi.ve

price increases took place due to production shortfalls, the government would

release food stocks to lower prices and when prices came down due to a good

harvest, the government would buy up quantities at price levels that protected

producers. The Agricultural Prices Commission (APC hereafter) and the Food

Corporation of India (FCI hereafter), were thus born as two of the institutional

centerpieces of the price strategy, the former to make price recommendations and

the latter to buy and sell grains at the recommended price.20

Technology Policy. Science and technology were the second critical component

of the new strategy. In one of his first speeches after taking over as the Food

Minister, Subramaniam argued:

19 "Increasing Food Production", November 28, 1964, in Speeches, p. 24.20 Speech in Coimbatore, November 28, 1964, in Speeches, p. 24.

15

"If we have to make advancement in agriculture, it has to be based onscience and technology. No doubt we have a great tradition built up overthousands of years of experience in agriculture. But if we have to makeprogress and keep abreast of the other developed countries in the field ofagriculture, despite our traditions, we have to break away from them andadopt new techniques and new methods. That is absolutely necessary."2 1

Subramaniam explained what he meant by this. The new, biologically

developed, high-yielding variety (HYV) seeds - "the miracle seeds" - had changed

the nature of agriculture in the mid 20th century, introducing a new logic in

cropping practices:

"The crux of the new approach is the introduction of intensive cultivationusing new high-yielding varieties of seeds backed by more and better plantnutrients - effective plant protection and adequate water supply. Someexperts, not geneticists (but other scientists) have expressed doubts as tothe feasibility of the high yields which have been obtained by the newvarieties. It is strange that these experts should admit that while suchhigh yields are possible in other countries they are not possible inours... .What other countries can do we can also do." 22

Notice the package introduced; hybrid seeds, plant nutrients (chemical

fertilizers), plant protection (pesticides) and controlled water (irrigation).

The most controversial element in this package was chemical fertilizers -

controversial because of its foreign exchange implications. Domestic production

of chemical fertilizers was still at an embryonic stage in India. Large scale

imports would be needed if fertilizers were made central to the agricultural

strategy. If anything, the foreign exchange situation was tighter in the mid-

sixties than any time since independence. Yet, convinced that without

fertilizers required increases in production were not possible, Subramaniam

called them absolutely indispensable:

21 From a speech delivered in Coimbatore on July 17, 1964, in Speeches, p. 9.22 Speech in Kanpur, February 2, 1966, in Speeches, p. 40. An earlier

statement about the centrality of seeds is available in Subramaniam's speech,delivered on January 1, 1965, to the National Development Council (ibid, p. 31).

16

"The king-pin of agricultural development in the modern age has beenadequate fertilization of the soil. I am aware that there are two schoolsof thought on this: some people feel that we should resort increasingly tothe use of organic manure. I do not disagree that whatever the inputs offertilizers, we have to use our available organic manure also in the mostefficient way possible. It is, however, true that the history of othercountries is a standing evidence of the fact that revolutionarybreakthroughs in agricultural productivity have come about mainly by ...increased use of fertlizers. It is important to note this factor because,taking the country as a whole, India uses today roughly 2 to 3 tons offertilizers...per thousand hectares of arable land. This compares withthe world average of 7.86 tons, Japan's 124 and our neighbour Ceylon's6.25......our position still remains low down in the scale."23

Contrast this position with Nehru's again. Nehru had argued that relying on

fertilisers was "a dangerous tendency because it took away the minds of

cultivators from the use of.. .manures..used in other countries"2 4 and then, went

on to cite the example of China where agricultural production had increased at a

faster pace than India "without any tremendous use of fertilisers". 25

Just as implementing the new price policy required the Agricultural Prices

Commission (APC) and the Food Corporation of India (FCI), the science and

technology policy also had its institutional requirements. Subramaniam placed

the highest emphasis on research and extension. If his first cabinet paper was

on price policy, his second2 6 was on the importance of strengthening scientific

research institutions and of giving "financial inducements" to agricultural

scientists "so that proper men of quality (are) attracted to these

professions."27 In the event, research institutions were reorganized, a new

23 Speech in Coimbatore, November 28, 1964, in Speeches, op cit, p. 21.24 Cited from Fertiliser News (New Delhi, December 1965, p. 10) in Arthur

Goldsmith, 1988, "Policy Dialogue, Conditionality and Agricultural Development:Implications of India's Green Revolution", Journal of Developing Areas, Vol. 22,No. 2, January, p. 189.

25 Fortnightly Letters, op. cit., August 12, 1956.26 As reported by Subramaniam in The New Strategy, p. 12.27 "A New Deal For Agricultural Scientists", Speech delivered in

Coimbatore, July 17, 1964, in Speeches, p. 11.

17

agricultural research service was established28, collaboration with international

agricultural research institutes was strengthened2 9 , and upward revisions in the

pay scales of agricultural scientists took place. 3 0 And, finally, in order to

make sure that the results of research reached farmers, the extension service was

restructured. Under Nehru, the extension agent, the so-called Village Level

Worker, was expected to play multiple roles - inform farmers about education

opportunities, teach them health care, plant care, and sanitation, as well as

spread new scientific research. Subramaniam deemphasized the "generalist" role

of extension agents, emphasized their technical training in agricultural

universities, and increased their numbers so that villages could be adequately

covered.3 1

In short, whereas Nehru's agrarian model was institutional and synthetic in

the sense that agricultural productivity in that model was a function of a

transformation of agrarian relations, of nothing less than a political and social

restructuring of India's rural life brought about by land reforms, cooperatives

and institutions of local self-government,32 Subramaniam's model was essentially

technocratic. Subramaniam was not opposed to institutional change in principle

but he was convinced that the institutional strategy was not working and had

little chance of success. On land reforms he argued: "Unfortunately one could

not wait until the land reform legislation was implemented effectively. We had

been trying for this over the last ten years but owing to political and other

28 See "Need For a Dynamic Research Programme" (pp. 63-71) and "TheReorganization of Agricultural Research" (pp. 76-84), in Speeches.

29 "International Cooperation in Rice Research", in Speeches, pp. 264-271.30 "A New Deal for Agricultural Scientists", Speeches, op cit.31 The New Strategy, pp. 40-41.32 This point is developed in detail in Chapter Two of my dissertation,

"Limits to Power", op. cit.

18

X

factors it had not proved possible to implement it properly.. ."a And on

cooperatives, the second key component of Nehru's strategy, his argument was:

"Where cooperation is not in a position to deliver the goods, shall we wait

indefinitely for the cooperatives to become effective instruments?"3 4

Subramaniam believed that in the context of the mid-1960s, the institutional

approach amounted to "mere slogan shouting", stressing that a more "pragmatic

approach" was needed. The choices were clear: " Would you like to have ... high

production and attain self sufficiency within the country.....or would you prefer

to continue dependence upon food imports indefinitely?"3 5 The institutional

approach, he argued, would lead to the latter; his own approach would usher in

the former.

The exponents of the institutional approach, however, did not relent.

Fierce political battles within the institutions of the Indian state ensued.

Those supporting Subramaniam thought he was correcting an anti-agriculture bias

in India's development policy. His political opponents believed that their

ideological designs were superior, designs that were being devalued and consigned

out of power now. In the end, the structure of post-Nehru power politics and a

skillful strategy by Subramaniam, aided by the eventual return of good weather,

produced a victory for his policy design. By the late sixties, the new

agricultural strategy had come irreversibly to stay. The intervening struggles,

however, were nothing short of cataclysmic: the main contours are reviewed below.

33 In The New Strategy, p. 28.

34 Subramaniam's Speech to the Agricultural Committee of the NationalDevelopment Council, printed in full in Appendix I of the Ministry of Food andAgriculture, Agricultural Development: Problems and Perspective, New Delhi:Government of India, 1965.

35 The New Strategy, p. 28.

SECTION 1.4

BATTLE FOR POLICY CHANGE:

STRUGGLES WITHIN THE STATE INSTITUTIONS

The most intense policy struggle took place between the Food and Agriculture

Ministry on the one hand and the Finance Ministry and the Planning Commission on

the other. Also involved were the Prime Minister's Secretariat and the Congress

party. This struggle can not be understood in purely political terms. Part of

the battle was driven by the "technical" parameters within which these ministries

or bureaucracies customarily operate. Food prices and investments in

agricultural technologies intersect with the respective concerns of these

bureaucracies in crucially significant ways. I set forth below the logical

structure of these competing concerns. Having done so, I shall move on to an

empirical account of these struggles and how they were resolved.

1.4.1 The Logic of Intrabureaucratic Politics

The intrabureaucratic struggle over the food economy hangs on two very

different economic views of food prices: macro and micro. Since food prices are

one of the most critical prices in a developing economy affecting the general

price index, industrial wages, industrial profitability etc, the macro view is

more concerned with the economywide, intersectoral impact of food prices. On the

other hand, since producer price incentives are considered important for raising

food production, the micro view focuses essentially on the intrasectoral

implications of food prices. Raising producer prices is desirable, indeed

necessary, in the micro view but the macro view considers such raises troubling

20

since increases in producer prices typically also lead to increases in consumer

prices, unless a heavy state subsidy drives a wedge between the two.36

To the Finance Ministry, the general price level in the economy and macro

balances (budget, trade, foreign exchange) are matters of great concern.3 7 Food

prices are intimately connected with both of these concerns. First, food prices

can be highly inflationary for the economy since they have a large weight in the

various price indices. Second, they affect budget balances and the level of

deficit financing: if raising producer prices for food can not be passed on

entirely to consumers, a food subsidy is inevitable; moreover, for inducing

farmers to use new technology, if it is necessary first to subsidize fertiliser

use or capital investments on the farm, another level of subsidy is created.

Third, if the agricultural strategy is heavily fertliser-based, then fertiliser

imports affect the trade balance, too, and involve foreign exchange outlays.

These expenditures can presumably be met if revenues can be raised: by imposing

income tax or user levies on those benefitting from the state-subsidized new

technology but in order for that to happen, the subsidy must be provided to begin

with; by imposing higher income taxes in urban sectors or increasing indirect

taxes (excise, sales, customs) which may or may not be difficult; and by

increasing exports, which may or may not be difficult. If resources can not be

adequately raised but new programs must be run, the requisite levels of deficit

financing become necessary; they may, in turn, cause inflation. One can make the

36 A detailed rationale for the macro and micro views of food prices appearsin Chapter one of my dissertation, "Limits to Power", op. cit.

37 Interviews with decisions makers are my main method for constructingthese positions. Interviews with the various Finance Ministers, FinanceSecretaries and Chief Economic Advisers (CEA) since 1965 form the base. See Appendix.

21

connections even more complex but let us stick with our simple model of the

customary considerations that drive a Finance Ministry.

Food prices are of concern to the planners, too.3 8 First, due to their

effect on the price level in the economy, they determine the real value of the

planned investments even when nominal magnitudes stay the same. Second, by

affecting the real incomes of the population, food prices determine the effective

demand in the economy which, in turn, feeds back into the growth rates of various

consumer industries directly and, since consumer industries get their machines

from the capital goods industries, they also link up with the capital goods

industries indirectly. Third, food prices affect wages, hence profitability in

industry. And finally, in the early stages of development, resource transfers

from agriculture are expected to finance industrialization but raising food

prices and financing new technology in agriculture entail an investment shift

away from industry and towards agriculture, including the possibility that a

surplus from other sectors might have to raised to finance agricultural

development.

The Food and Agriculture Ministry has its considerations, too.3 9 If prices

and technology are considered critical for increases in food production, as the

Food Minister came to think, then, clearly a macro (intersectoral) view of food

prices, that customarily dominates the perspective of the Finance and Planning

Ministries, can not be the perspective of the Food and Agriculture Ministry. In

38 Interviews with deputy chairmen and members of the Planning Commission atvarious points. See Appendix.

39 Interviews with Ministers of Food and Agriculture, and Agriculture andFood Secretaries. See Appendix.

22

such a situation, it must of necessity be a micro (intrasectoral) view that

links increases in producer prices with increases in food production. Besides,

if technological investments are also required in agriculture, then whether these

entail a shift away from industry is not the primary concern of the Food and

Agriculture Ministry. Its primary task is to increase food production. Thus,

whereas the institutional strategy has the merit - at least in principle - of

coalescing the concerns of the Food Ministry with those of Planning and Finance,

an intrabureaucratic struggle is built into the very logic of the price and

technology strategy.

For analytical purposes, let us freeze this intrabureaucratic frame for a

while and consider how such an intrabureaucratic struggle might be resolved.

Clearly, as to which of these views would prevail can not simply be a

"technical" matter. If the political heads of these bureaucracies - that is,

the respective ministers - share a particular ideological world view (let us say,

the institutional view of agriculture), some moderation of tensions will

automatically take place. If that is not the case, the responsibility of

resolving these differences, in a parliamentary system of government, rests with

the Prime Minister, the head of the government.

Consider the various positions a Prime Minister could take: because of his

own world view; because of political calculations; based on financial

implications; or a mixture of all these. Consider the ideological side first.

If the Prime Minister is inclined towards an institutional position, the Food and

Agriculture Ministry will have to accommodate Planning and Finance; if he is

23

convinced of a price and technology vision, the Planning and Finance Minsitries

will have to accommodate Food and Agriculture; if he does not have a well laid

out policy design in mind but has pro-agriculture instincts, he can - and, most

probably, will - go with the Food and Agriculture minister. The head of the

government might also have some power considerations in mind: he could go with a

minister who is more powerful regardless of where his sympathies lie; he could

think of how his party would react to the decision; he might also think of how

the larger society would react. The decision might also depend on certain

political exigencies - how close the elections are and whether the decision would

have any electoral impact. And a final set of considerations could be the

financial implications of the decision: Is a price and technology strategy, even

if desirable, affordable? If expensive but desirable, what readjustments in the

current financial priorities of the government could possibly be made?

What this array of choices indicates is how critical the role of the

leadership can be in policy changes. There is no special reason for the Prime

Minister to accept what is presented as a "technical" economic matter by Finance

or Planning. He has his own world view, has to contend with the importance of

factions if they exist in the party, has also to think of larger social

considerations. Moreover, abstracting from these political considerations and

speaking purely technically, there are two versions of rationality competing

here: macro rationality of Finance and Planning, micro rationality of Food and

Agriculture. An agricultural strategy considered ill-suited and expensive, even

dangerous, for the rest of the economy by Finance and Planning might be

considered necessary by Food and Agriculture. It should be clear that even

24

economic rationality or technical correctness has no uniquely acceptable

definition.

How was this abstract logic played out in India? How was it resolved?

With what consequences? Let us look at the empirical picture.

1.4.2

TOWARDS AN EMPIRICAL ACCOUNT

The actual process of agricultural policy change can be divided up in three

parts: i) the formulation of strategy (1964-65); ii) the battle for resources and

political support required to implement the strategy (1965-66); and iii) the

implementation (1966-67). Competing technical issues outlined above kept

surfacing in each stage, their intensity depending upon the ideological vision of

the protagonists involved and their power positions.

1.4.2.1 Conception: Putting Ideas and Institutions in Place

The Finance Minister was the first to raise objections when Subramaniam

introduced his ideas on price policy: "there was a heated debate in the

cabinet.. .with particular opposition from Finance Minister, T.T. Krishnamachari.

He argued the other side; how could we afford to increase food prices,

particularly for industrial labour and for the urban population? It would lead

to much discontent... ."40

40 Interview with Subramaniam, op cit, and The New Strategy, op cit, p. 5.

25

Shastri's pro-agriculture position helped Subramaniam. 4 1 Aware of the

opening provided by the Prime Minister but conscious at the same time of the

opposition of the Finance Ministry, Subramaniam's strategy was to generate larger

support for his ideas. On June 24, 1964 - shortly after the Cabinet meeting

where the Food and Finance Ministers clashed - Subramaniam presented his price-

oriented analysis of the agricultural problems to the state Chief Ministers.42

Then, he sought to elicit the support of experts, particularly those that were

also holding powerful positions in the economic bureaucracy. He also wanted to

get a professional view on what prices to have in the current agricultural year

(1964-65).43 In a dexterous move, he asked the Prime Minister to appoint a

committee with his own Principal Secretary, L.K Jha, as the chairman to look into

foodgrain producer prices for 1964-65 as well as to evolve the terms of reference

for an agency that would look into prices on a continual basis in future. The

purpose would be to present the Finance Minister with the recommendations of a

high-powered, expert body. Subramaniam knew Jha's economic views.44 Jha was

more inclined towards a technocratic than an institutional position. Jha was

also well-suited and well-placed for Subramaniam's purposes. As the head of the

P.M.'s Secretariat, he could be a bridge between Subramaniam and the Prime

41 Ibid.42 "A National Distribution-cum-Price Policy", in Speeches, pp. 187-192.43 India's agricultural year runs from June to May, starting with the

monsoon (kharif) crop sown in June and harvested three months later. The secondmain crop is grown in winter (rabi) - sown in November and harvested inMarch/April. Paddy is the main kharif crop, wheat the main rabi crop. Amongother major foodgrains, pulses are kharif crops and gram is grown in winter.

44 Interview, L.K. Jha, Delhi, December 23, 1986.

26

Minister, between the Central Government and the state Chief Ministers4 5 , and

could exercise considerable influence on the economic bureaucracy, too.

The Jha Committee was constituted on August 1, 1964. Its composition

reflected the intrabureaucratic dimension of the problem. Chaired by the head of

P.M.'s Secretariat, it had high officials from not only the Ministry of Food and

Agriculture, but also from Finance and Planning and had a leading agricultural

economist from academia.4 6 On September 24, the Jha Committee submitted its

report to the Prime Minister. It was accepted.

The Committee's main argument supported Subraminiam:

".... one of the most important problems facing the national economy is thatof augmenting agricultural production in a big way. This could be broughtabout mainly through the adoption of improved technology and additionalinvestment required for this purpose. To the extent that the price policycan assist this process, it should be its major objective to do so."47

The Committee also endorsed that a separate governmental agency for

determining producer prices every year be created to "provide incentive to the

producer for adopting improved technology to the widest possible extent and for

45 Cooperation of state governments was important because implementation ofagricultural policy, under India's constitution, is within the purview of states,not the central government which essentially makes policy. Subramaniam wasacutely conscious of this: "...I had to deal with the state governments forunless they fell into line it was no use introducing this strategy." (The NewStrategy, p. 25).

46 Other than Jha, the other high ranking members of the committee were T.P.Singh (Secretary, Planning Commission), B.N. Adarkar (Additional Secretary,Ministry of Finance), and S.C. Chaudhri (Economic and Statistical Adviser,Ministry of Food and Agriculture). Professor M.L. Dantwala was the academiceconomist. Dantwala went on to chair the first Agricultural Prices Commissionformed in January 1966.

47 Report of the Foodgrains Prices Committee, (New Delhi: Government ofIndia, published in October, 1965), p. 17. A fuller discussion of the nuances ofthe Jha Committee argument appears in Chapter Two of my thesis, "Limits toPower", op. cit.

27

maximizing production" without, however, losing sight of the "likely effect of

the price policy on the rest of the economy, particularly on the cost of living,

level of wages, industrial cost structure etc." 48 Until Nehru's time, the

latter (macro) considerations had overwhelmed the former (micro) concerns. The

Committee stressed both and this was the first time producer incentives were

strongly emphasized by experts, not simply by the Food and Agriculture Minister.

Subramaniam also made some more key bureaucratic changes. He found the

economic bureaucracy in the Agriculture Ministry still steeped in old thinking.

The agriculture secretary, the bureaucratic head of his Ministry, was a senior

civil servant, but he could see agriculture only "in the files". Subramaniam,

acting as the political head of the Ministry, replaced him with another civil

servant who was known to have specialized in agriculture at the field level and

shared Subramaniam's views on prices and technology.4 9 Subramaniam also

reorganized the decision making structure of the Indian Council of Agricultural

Research (ICAR). Piqued that the highest policy making body in agricultural

research was headed by a generalist civil servant whereas the counterpart body in

industrial research - the Council of Scientific and Industrial Research (CSIR) -

was headed by a scientist, he appointed a scientist, noted for his work on rust

in wheat, as the director general of the ICAR.50 Finally, upon the acceptance of

the Jha Committee report, the Agricultural Prices Commission (APC) and the Food

48 Ibid, pp. 20-21.49 The New Strategy, pp. 51-52. Also interviews, Subramaniam and Sivaraman

(Appendix). C. Sivaraman was appointed secretary. As a career civil servant inOrissa, he had specialized in agricultural programs and problems.

50 The New Strategy, p. 13-14. Dr. B.P. Pal, the director general, was thefirst scientist to head the ICAR.

28

Corporation of India (FCI), the two institutional pillars of the price component

of the new thrust, also came into being in January 1965.

Thus by the end of 1964 - within seven months of assuming charge -

Subramaniam had "set his house in order", received the support of the Prime

Minister and his Secretariat, created the institutions required for his policy

design, and had the proposal for policy shift accepted in principle in the

Cabinet. Policy details, however, were still to be worked out. The response of

the Congress party had to be ascertained. And the financial implications of the

new strategy were to be thought through. Implementation of the policy change

required all these.

1.4.2.2 Struggle for Party Support and Financial Resources5 1

Factional struggle within the Congress party erupted once again. The party

met at Durgapur for its annual session in January 1965. A new agricultural

policy had not yet been laid out in detail; only the signs of what was coming

were present. The debate was, therefore, pitched at a general level5 2 : whether

socialist principles were being abandoned, whether the goal of equity was being

sacrificed over a concern with production. Seeing clear portents of change, the

more radical fringes of the left of the center, now organized as the Congress

Forum for Socialist Action, mounted an attack on the new directions in the offing

and called for a return to Nehru's ideals. Their vociferousness was, however,

51 This section is indebted to, and builds upon, Francine Frankel's seminalresearch on this period in India's Political Economy, op. cit., (Chapters 7 and8).

52 Frankel, ibid, pp. 264-66.

29

met by the power of the party's middle tiers, consisting of state Chief

Ministers, and the other "state bosses".

Ultimately, a compromise resolution was passed. The party reaffirmed the

goal of "progress towards a socialist society" but recognised the need for

"quickening the pace of production, both agricultural and industrial". 5 3 This

was convenient political prose for saying that there were sharp divisions in the

party.

The next few months were spent by the Food and Agriculture Ministry on

working out the details of the new agricultural strategy. Meanwhile,

Subramaniam also decided that his strategy should be tried on a pilot basis so

that the seed-water-fertiliser package could be tested first and some experience

gained. The concept of a National Demonstration Program was thus born with the

1965-66 season as its starting point. 54 A small amount of new seeds - 200 tons -

would be imported from Mexico. A thousand plots with good irrigation would be

identified. Seeds and fertilizer would be distributed to the farmers owning

these plots. No farmer would be asked to sow the entire crop with the new

inputs; rather, "in the midst of traditional agriculture,... two hectares (would

be) cultivated with the new technology."55 This way, the risks would not be high

and if the farmer made a loss, the government would recompense him.

While, in the end, this way of phasing the strategy turned out to be a

clever move, Subramaniam's short run political problems worsened with the

53 Ibid, p. 266.54 The New Strategy, p. 47-50.-9 Ibid, p. 48.

30

involvement of foreign agencies in the country's economic policy. Faced with

India's increasing demand for foreign aid to support its investment effort, the

World Bank started a six month long expert evaluation of the entire Indian

economy in January 1965. The country was also beginning to feel the effects of a

monsoon failure. To meet its food requirement, India's dependence on American

wheat was likely to increase, which led to a serious deterioration in the Indo-US

relations. Section 1.5.1 will examine the role of foreign agencies during policy

change in detail. It will suffice to note here that external involvement in

India's charged political atmosphere only increased the level of controversy

over policy. Subramaniam had begun to be accused of promoting an "American

idea".56

Battle for Resources. Matters came to a head later in the year when the

full financial implications of the new strategy were laid on the table. Two

issues became clear. The agricultural proposals implied that a) the agriculture-

industry balance of plan allocations would have to change drastically and b)

because of the finances required, particularly foreign exchange, India's

development strategy would have to be ideologically reformulated. There would

have to be greater role for private investment, both domestic and foreign,

larger reliance on the world market, and lesser attention given to the intra-

rural equity goals of state policy.

In August 1965, as the last stages in the preparation of a an approach paper

56 For details, Frankel, op cit, pp. 268-288.

31

to the proposed Fourth Plan (1966-71)57 drew near, the Food and Agriculture

Ministry released its comprehensive outline of the new strategy for agricultural

production. To price incentives and new technology was also added a "betting on

the strong" approach.58 The new inputs would not be spread evenly; that would be

suboptimal. Rather, "a few areas with assured rainfall and irrigation" would be

chosen for a "concentrated application" of the new inputs so that maximum

production results could be realized. This was directly against Nehru's attempt

to develop backward areas especially through public investment.

The foreign exchange component 5 9 of the new strategy over the five year plan

period (1966-71) was projected to be Rs 1,114 crores (i.e. Rs 11.14 billion,

which converted to about $2.8 billion at the then official exchange rate). This

was a little over six times the total amount allocated to agriculture during the

preceding third plan (Rs. 191 crores). The three largest imports were going to

be fertilizers, seed and pesticides since the domestic production of these

inputs was much below the expected requirements.

For such a large allocation to take place, foreign exchange allocations for

industry, it was clear, would have to be drastically cut. Further, in order to

generate or expand domestic capacity in fertilisers, pesticides and seeds,

57 Partly because of the political struggles over planning, the Fourth Plan,originally scheduled for 1966-71, could not come into being till 1969. Theperiod 1966-69 continued to be one of unresolved struggles. Many outlines of theFourth Plan were written and debated.

58 Details in Ministry of Food and Agriculture, Agricultural Production in

the Fourth Five Year Plan: Strategy and Programme, New Delhi: Government ofIndia, pp. 1-3.

59 The financial magnitudes here and in the following paragraphs are takenfrom Frankel, op cit, pp. 277-78. I shall not repeat this source in the footnote

unless a different source is available.

32

foreign and domestic private investment seemed to be the only practical source;

the state simply did not have enough resources of its own. Fertilizers were

especially troublesome. Until 1965/66, fertilizers were more or less completely

a public sector monopoly~. At the initiative of Subramaniam, foreign investors

had already been consulted early in the year. Bechtel International, an

American company, was prepared to set up five large factories in collaboration

with the Government of India, but, given India's import substitution thrust and

the insistence of Bechtel on complete managerial and technical control during

construction and substantial control over prices, marketing and distribution,

India's Finance Minister had rejected the proposed arrangement.

The proposals of the Agriculture Ministry, therefore, required a severe cut

in investment in the planned industries and/or an ideological reformulation of

the import substitution strategy. Predictably, the Planning Commission found the

proposal unacceptable. It proposed a cut of 46 per cent in the outlay projected

by the Agriculture Ministry - with fertilizers receiving a 58 per cent cut.

The Planning Commission had its reasons, though they appeared increasingly

weak. The planners had once again made a plan which ran into the by now

customary - and to some, highly irritating - financing problems. The planners

did reduce the projected investment of Rs 15,620 crores to Rs 14,500 crores.

Also, to accommodate the wishes of the political masters that agriculture be

given higher priority, investment for agricultural sector were increased from

21.8 per cent of the total public outlays in the 1964 proposal to 22.8 per cent

33

in the new 1965 proposal and industrial investment was reduced from 21 per cent

to 19.8 per cent respectively.60

But the proposed reduction hardly solved the two big constraints: domestic

savings and foreign exchange. The planners estimated the resources that could be

domestically raised but, the cut in investment outlay notwithstanding, a "savings

gap" of Rs 3650 crores was still left. Only a large increase in public savings

could fill this gap. Convinced that new urban taxes were not possible any more,

the planners demanded that one fourth of the "gap" be filled by taxing the rural

sector, which had contributed barely 2.6 per cent in the total tax revenues of

the last three plans. This was exactly the opposite of what the Agriculture

Ministry was proposing. It was arguing for a larger investment in agriculture,

not higher rural taxes.

The foreign exchange constraint was even more serious. Exports for the plan

period were expected to touch Rs 5100 crores but imports and debt servicing

required Rs 6650 crores - that is, a "foreign exchange gap" of Rs 1550 crores

existed, even before the demand of food and agriculture ministry for Rs 1100

crores worth of foreign exchange came. It was estimated that if this demand was

met and if the foreign exchange component of investment expenses was also

included, external assistance worth Rs 4000 crores was required. Essentially,

this meant that foreign aid would have to go up from its third plan level of $1.1

billion per annum to $1.7 billion per annum. Moreover, this also meant that the

foreign exchange and savings gap together constituted nearly half of the total

financial requirement for the Fourth Plan.

60 Frankel, op cit, p. 282.

34

The Planning Commission, therefore, made it clear that the only affordable

way to increase food production was to return to Nehru: to "concerted and well-

coordinated efforts of the Community Development organization, Panchayati Raj

institutions and cooperatives."6 1

Both the proposals - of the Agriculture Ministry and the Planning Commission

- were presented to the National Development Council where the central

government and the state Chief Ministers were to pass their judgment on the plan.

The views of the state governments were known to be pro-agriculture. The Prime

Minister also supported Subramaniam. He asked the Planning Commission to give

another thought to the fourth five year plan, repeating that agriculture be given

greater attention in the next plan proposal.6 2

1.4.2.3 Resolution of the Struggle and Policy Implementation

Three months later, during which Shastri was, among other things,

preoccupied with the brief war that broke out between India and Pakistan, he

opted to resolve the policy battle via realpolitik. Instead of asking Finance

Minister Krishnamachari to resign on policy grounds, Shastri essentially secured

his resignation on personal grounds. In a somewhat mysterious way, an old case

of suspected corruption against the Finance Minister abruptly re-surfaced - and

61 Planning Commission, 1965. Fourth Five Year Plan - Resources, Outlays andProgrammes, New Delhi, p. 28.

62 Summary Record, 22nd Meeting of the National Development Council, p. 285.

35

this time, with particular virulence. 63 The Prime Minister instituted an

inquiry, upon which Krishnamachari himself submitted his resignation. One of

the strongest opponents of a policy shift and the most important proponent of

Nehruvian economic policies at the Cabinet level thus made an unceremonious exit

from power, not on grounds of ideology and policy but to save himself from

further personal ignominy.6 4 Within a day of Krishnamachari's resignation, a

"pliable" Finance Minister, Sachindra Chaudhri, was appointed.6 5

Subramaniam's victory was even more complete later that year. Upon

Shastri's sudden death barely two weeks after Krishnamachari's resignation, Mrs

63 Krishnamachari was accused of misusing his office to grant special favorsto a firm managed by his sons. As to how this case became politically importantin December 1965 is still not clear. The usual hypothesis is that the timing waspolitically intended.

64 Another complication was added before the final resignation. The WorldBank evaluation, headed by the Bell Mission, was released in October. The WorldBank supported Subramaniam's proposed shifts and criticized Nehru's economicpolicies with which the finance minister had been personally associated fornearly a decade. The World Bank aid (as well as the US aid) was made conditionalon devaluation of the Indian currency and a reordering of economic prioriti-es.Shastri, along with Subramaniam and his own secretariat, was already headed inthe direction of reordering priorities. But devaluation was problematic. Firstof all, there was no clear cut economic case for it - both Finance and CommerceMinistries had rejected the proposal. Secondly, Shastri did not want to claimresponsibility for accepting a recommendation, which seemed to hurt nationalpride. However, since foreign exchange was needed, a way had to be found. TheFinance Minister was not even in broad agreement with the World Bank; the Bankhad mauled everything he had stood for. He rejected the call for devaluationoutright. Details are available in David Denoon, 1986, Devaluation UnderPressure: India, Indonesia and Ghana, Cambridge, MA: MIT Press, Chapter 2.Shastri now also had to find a finance minister who would take the responsibilityfor devaluation.

65 Chaudhri was a Member of Parliament from West Bengal. He was consideredknowledgeable on company law but had absolutely no experience in public finance.Moreover, he was on the managing board of several private companies. Nothingmore than these facts was especially known about Chaudhri. It was hard to avoidthe impression that the Prime Minister wanted to end the recalcitrance of themost important economic ministry in the country. The left of center factioncould not defend Krishnamachari due to the uproar over suspected corruption.

36

Gandhi was elected by the Congress party to head the government on January 19,

1966. Mrs Gandhi did not disturb the Cabinet composition significantly. But one

of her first acts facilitated Subramaniam's task. In addition to his current

responsibilities as the Agriculture Minister, Subramaniam was also made a member

of the Planning Commission. He had "by-passed the Planning Commission till early

1966",66 which led to controversies and conflicts. Now, he was a member of the

Planning Commission. The intraburaucratic tension was resolved and the results

were dramatic. In September 1965, planners had asked for a return to community

development, panchayats and cooperatives. A year later in August 1966, with

Subramaniam in the Planning Commission, the new draft outline of the Fourth Plan

read as follows:

"If our dependence on imported foodgrains has to cease, it is necessary tomake far greater use of modern methods of production.... . A new strategyor approach is needed if we are to achieve results over a short span oftime. During the last four years as a result of the trials conducted inseveral research centers in India on exotic and hybrid varieties of seeds, abreak-through has become possible. These varieties are highly responsive toa heavy dosage of chemical fertilisers............ . The long termobjective is to organise the use of high-yielding seeds together with ahigh application of fertilisers over extensive areas where irrigation isassured."67

The planners also accepted the price component of the strategy:

"A... factor which contributed to slow growth in agricultural production wasthe absence of an effective price policy. Price support policy in the pastwas aimed at eliminating distress. But this did not provide the incentiveneeded for dynamic agricultural growth...... . Since January 1965, anAgricultural Prices Commission has been set up to keep the price situationunder constant review and to advise the Government on price policies. Priceand marketing policies will assume added significance during the Fourth Planperiod in the context of a massive effort for securing rapid increases inproduction."68

66 As reported by Subramaniam himself in the New Strategy, op cit, p. 50.67 Planning Commission, Fourth Five Year Plan: A Draft Outline, Delhi:

Government of India, p.175.68 Ibid, p. 174.

37

Meanwhile, the National Demonstration Program -- the two hectares

cultivated with new seed-water-fertiliser technolgy "in the midst of traditional

agriculture" -- also started bearing fruit. Though due to a second successive

drought in 1966-67, the foodgrain production at 74.2 million tons was barely up

from 72.3 million tons in 1965-66, the islands of two hectares were doing

exceedingly well: "Farmers used to come there as on a pilgrimage to see this new

wonder and finally, when the harvesting was being done, everybody was amazed that

this level of productivity could be achieved on their own land".6 9 For 1966-67,

the Food and Agriculture Ministry had planned to import 5000 tons of wheat seed,

but "demand picked up so much" that ultimately, India ended up importing 18000

tons.

The fertiliser expenses were also met. The changed Finance Minister was

only too willing to comply: "I approached the Finance Minister for resources for

the import of fertilizers. At the time of the controversy, the Finance Minister

had been very much opposed to the use of scarce foreign exchange for the import

of fertilisers for these new varieties, but by the time I made my approach

another Finance Minister had been appointed who was more open to influence. We

thus secured the foreign exchange and mounted an import programme for

fertilizers."70 After two years of intrabureaucratic struggle, Subramaniam had

finally triumphed.

1966-67 was the first year of the implementation of new strategy. Out of a

total of 130 million hectares under crops, 2.4 million hectares were to come

69 The New Strategy, op cit, p. 48.70 Ibid, p. 37.

38

under new seeds in 1966-67.71 India's foodgrain output rose substantially from

74.2 million tons in 1966-67 to 95 million tons in 1967-68. Two successive

droughts have hardly ever been followed by a third bad year in India. In 1967-

68, good weather was overdue and the monsoon did return. But even the most

unsparing critic of the new strategy could not have attributed a rise of 20

million tons in a year to the weather alone. By 1970-71, India was producing

108.4 million tons (Figure I). The area under HYV seeds, starting with 1.9

FIGURE I

Foodgrain Production in'1960 -61 i to, 1970 -71

C

i11

105

90

85

130

75

70 -*1960-61

India

* 1962-63 :* 1964-G5 *1966-67 *176-69

Y0eo':

01970-71

SOURCE: Ministry of Food and Agriculture, Indian Agriculture in Brief,Various Issues.

71 The projected figures in this paragraph are from The New Strategy, p. 45,the actual figures from Fertilizer Statistics, p. 11-33 and p. 11-107.

39

million hectares in 1966-67, had gone up to 15.4 million hectares in 1970-71,

which was higher than expected. The new technolgy had caught the fancy of

farmers in the irrigated belt. A green revolution had arrived.

Also, consider what happened to imports (Figure II). Between 1960/61 and

1965/66, food imports, mostly American wheat, rose while domestic procurement

lagged far behind. After the policy change, domestic procurement rose to exceed

imports and by 1970/71, the equation had completely reversed.

FIGURE II

Imports 6nd Domestic Procurement-1960 -61 to 1970 -7-1

0

C

*I.i - ___

10

9

7

0

4

13

7--

*1960-61 **1962-63 1964-65 *1966-67

t t Dorneti Pnxc urwnent

1970-71

SOURCE: As in Figure I

40

1.5

DID THE INDIAN STATE ACT AUTONOMOUSLY?

An explanation of state policy in terms of struggles within the state is

methodologically incomplete. The state operates in a context: the civil society

and the international system. Did the forces outside the state influence its

actions or did the state act independently? How does one define independent

state action? I take up first the more often cited source of India's policy

change, the pressure exerted by the West. Then I move to its domestic correlate,

the dominant class in Indian agriculture.

1.5.1 The Role of External Actors

Three external actors were involved in India's agricultural policy: the

World Bank, the United States Government and the private US Foundations. What

was the nature of their influence? Did they "lean against an open door" or did

they open a door that was closed. 7 2

The belief that the policy change in the mid-sixties was a result of Western

and/or American pressures, exerted directly via the U.S. Government as well as

orchestrated via the World Bank and the Ford and Rockefeller Foundations, is

widely prevalent in left circles in India and elsewhere. But it is not confined

to them alone. The external actors themselves have made that claim. The World

Bank in a public report argues:

72 The metaphor is from L.K. Jha, 1973, "Comment: Leaning Against OpenDoors?", in John p. Lewis and Ishan Kapur, The World Bank Group, MultilateralAid, and the 1970s, Lexington, Mass.: D.C. Heath and Company, p.97.

41

"Changes began in 1966. A number of foreign experts working in India forthe Rockefeller and Ford Foundations began pressing the Indian government toimport high-yielding wheat varieties... The Indian government decided thatthe potential of the (new) technology far outweighed its risks.. .IDA (softloan window of the World Bank) was closely involved with this decision. Ithad carried out a massive study of Indian agriculture in close collaborationwith the government of India.. .As a result of this study, an AgriculturalPrices Commission was established to set prices at which the governmentwould purchase crops from farmers; the favorable mixture of grain andfertilizer prices it set encouraged farmers to produce more. The FoodCorporation of India was created to buy up grain in the good years to storefor the lean. Largely as a result of this organizational effort India nowmaintains comfortable stocks of rice and wheat." (emphasis added)7 3

In order to judge this claim, it is necessary first to disaggregate the

sources, examine what their respective recommendations actually were, at what

point was the advice given or influence used, as also what levers they had for

influencing the state. It is also necessary to juxtapose this with another set

of facts: what developments were under way in India's agricultural policy, and at

what points did the break in policy occur in terms of ideas, institutions and

actual implementation? The latter facts have already been presented.

1.5.1.1 The World Bank

Let us take the World Bank first. The claim cited above rests on the fact

that the Bell Mission of the World Bank which reviewed India's economic policy in

the mid-sixties was responsible for the change in India's agricultural strategy

(along with the Ford and Rockefeller Foundations). But what did the Bell Mission

say about agricultural policy and when?

73 The World Bank, 1983, IDA in Retrospect, Washington D.C., p. 44.

42

The central thrust of the Bell Mission's critique of Nehru's agricultural

policies was as follows: " While additional labor does add to production,

increased labor alone will not add enough to keep pace with the needs of a

growing population .... There must be steps to.... provide price incentives, to

back incentives with adequate supplies of needed imports and to promote the

credit basis for investment by large and small farmers alike." 7 4 The "needed

imports" were mainly fertilizers, pesticides and farm machinery.

The Bell Mission was particularly severe on India's price policy. The

Mission argued:

i) Producer prices should be "high enough to make investment in increased

inputs profitable.... the Government cannot carry consumer interests to the point

of offering disincentive to farm production." 7 5

ii) There should be institutions to support this price policy: " While not

being a monopoly buyer or seller, (the government) must try to command the market

situation at pre-determined low and high points. To eliminate fluctuations by

curbing both extremes, it must command stocks and some assured inflows such as

imports.. ."76

These recommendations are clearly about the desirability of having a price

and technology policy in place of a labor intensive, cooperatives-based policy.

The last recommendation is also about the necessity of having an institution like

74 Bell Mission Report to the President on India's Economic DevelopmentEffort, Vol. II, Agricultural Policy, October 1, 1965, p. 37.

75 Ibid., p. 47.76 Ibid., p. 51.

43

the Food Corporation of India. In that sense, they are no different from

Subramniam's approach.

But these recommendations were given in October 1965. Even if it is argued

that only the formal recommendations were given in October 1965 and the Mission

had started its work in January 1965 (therefore its views must have been known),

the fact remains that these policies and institutions were already in place

before the Bell Mission started its work. Subramaniam's price policy paper to

Indian cabinet was submitted in June 1964; the Jha Committee was appointed on

August 1, 1964; its recommendations were accepted in October 1964 and, on the

basis of the Jha Committee and Subramaniam's views expressed as early as June and

July 1964, the Food Corporation of India (and Agricultural Prices Commission) had

already come into existence in January 1965.

Moreover, since 1956 India's Food and Agriculture Ministers had been

arguing for price incentives and technological investments in agriculture.7 7

What they always ran against was Nehru's institutional view supported by his

power position, which, added to a lack of professional support for them in the

economic bureaucracy, turned out to be the cause of their failure at the level of

policy making. A more favorable political context, on the other hand, made a

critical difference.

Thus, both in terms of ideas and institutions, a causal case in favor of the

World Bank can not be made. That "the changes started in 1966", as the World

77 Details in Chapter Two of my thesis. "Limits to Power", op. cit. Alsosee Frankel, op. cit., pp. 140-45, and pp. 230-35.

44

Bank argues, is a claim that an internal political reading of economic policy

does not substantiate. They had already started in 1964.

1.5.1.2 The Role of the US: A Brief Chronology and Some Conclusions

The American involvement was of two kinds: of the Government and of private

foundations such as the Ford and Rockefeller Foundations. I take up the US

Government first. No less a figure than President Lyndon B. Johnson himself

claimed that the shift in India's strategy was "the first important direct result

of our new policy."78 What was the "new" American policy and how did it develop?

A brief historical reconstruction of facts is necessary.

Figure III shows India's dependence on imports (predominantly American

Wheat) for its public distribution requirements in the 1960s. India and the US

had signed the first of their many agreements under Public Law (PL) 480 in 1957.

The US undertook to supply wheat to India at concessional terms, terms that

included payment in rupees for part of the shipments. The agreement represented

a marriage of convenience. Given India's foreign exchange constraint, full

payment in dollars would have been very difficult of India. The foreign exchange

thus saved could be used for imports of capital goods. Moreover, compared to

Indian wheat, American wheat was very cheap. Wheat imports thus provided a means

to circumvent the political difficulties associated with

78 Lyndon B. Johnson, 1971, The Vantage Point, New York: Holt, Rinehart andWinston, p. 225. Those who have formed judgments only on the basis of theJohnson Presidency archives have been led to a similar conclusion. An example isCarlyn Castore, 1982, "The United States and India: The Use of Food to ApplyEconomic Pressure - 1965-67", in Sydney Weintraub, ed, Economic Coercion and theUS Foreign POlicy, Boulder, Colorado: Westview Press.

45

FIGURE III

Imports, Procurement & Public Distribut-ers-60-> to I-970 -7 1

11~ -j -

14

12

9-

7

4

3

I

SOURCE: As in Figure I

46

.*

1964-65 *1968-69

Year.+* Pity:tsrment 0 Pttbile DI5.t0 i4Nrs

procuring food domestically at low procurement prices for public distribution in

the cities. For the United States, exports to India, a large country with a

large need, offered a way to reduce its accumulating wheat surpluses.

In 1956, the US started with 3.1 million tons of wheat exports. Over the

next decade, however, wheat exports rose to reach a peak of 8, 10 and 8 million

tons in 1965, 1966 and 1967 respectively. While imports from the US were never a

large proportion of India's overall production - even quantities as high as 8 to

10 million tons constituted only between 12 to 15 per cent of the total output -

the public distribution system for the cities by the mid-sixties became almost

completely dependent on wheat imports.

Trouble began in 1965. As India's dependence mounted with the first big

drought, the US reserves entered a period of decline. In 1961, the American

wheat stocks stood at 38.4 million tons; by 1965, they had declined to 22.2

million tons. Moreover, the prediction for the 1966 crop was bad; production

was expected to fall sharply.7 9

In the autumn of 1965, faced with declining stocks at home and increasing

demand from India, President Johnson himself took charge of wheat exports. He

put wheat supplies on a "short tether". Wheat under PL 480 would be supplied but

shipments would be released on a short run, month-to-month basis. The

79 For a detailed account of Indo-US food aid relationship, see RobertPaarlberg, 1985, Food Trade and Foreign Policy: India, the Soviet Union and theUnited States, Ithaca, NY: Cornell University Press. Also, James Bjorkman, 1980,"Public Law 480 and the Policies of Self-Help and Short-Tether: Indo-AmericanRelations, 1965-68", in Lloyd and Susanne Rudolph, eds, The Regional Imperative,Atlantic Highlands, NJ: Humanities Press. The figures quoted here are fromPaarlberg, p. 146.

47

Government of India would submit its food needs every month and President

Johnson's clearance would depend upon a reform in India's agricultural policy:

giving price incentives to producers, increasing fertilizer production under

private auspices, and bringing more acreage under irrigation. These demands were

communicated to the Indian government in the fall of 1965.60 The curious paradox

is that Subramaniam had already moved in this direction a year back and the Food

and Agriculture Ministry, as pointed out earlier, had already prepared its

detailed policy proposal for the consideration of the National Development

Council by August 1965.

Another complication was added soon. The outbreak of the Indo-Pak War in

October 1965 led to the suspension of US aid and later, resumption of aid was

made conditional upon policy reform that went on to include economic policy in

general, not just agricultural policy. The changes recommended were the same as

those suggested by the Bell Mission of the World Bank, which included greater

role in the economy for domestic and foreign private capital, and a devaluation

of the currency. Two kinds of aid, thus, got entangled: economic aid and food

aid. A second year of drought followed, putting both under greater stress.

Robert Paarlberg's research has thrown some new light on the

intrabureaucratic politics surrounding food aid in Washington.81 He demonstrates

that, by the spring of 1966, the State and Agriculture Departments were arguing

that agricultural reforms in India were already in place and, moreover, a second

crop failure might lead to conditions of famine: therefore, a short tether

80 Pdarlberg, ibid., p. 148.81 ibid, pp. 144-156.

48

policy was uncalled for.8 2 The White House, however, remained uninfluenced.8 3

In June 1966, India finally devalued the rupee by 36.5 per cent, a decision that

led to countless political difficulties for the fledgling government of Mrs.

Gandhi.8 4 Johnson resumed US aid but, still, "kept the short tether on. No one

would starve because of our policies. India would receive the grain it needed

but on a month-to-month basis rather than a year-to-year basis." 85 The short

tether was not relaxed even after Subramaniam, during his many trips to the US, 86

declared in November 1966 that without 2 million tons of immediate shipment, the

food stocks in India would be completely exhausted by mid-January. 8 7 The short

tether policy remained intact until the spring of 1967 by which time the crisis

resolved itself since it became clear that, with good weather returning, India

was going to have a record crop. Dependence on US wheat, thereafter, continued

to decline till India unilaterally terminated the PL 480 agreement on December

31, 1971.88

92 Ibid, pp. 151-57.83 Cf: "I stood almost alone, with only a few concurring advisors, in this

fight to slow the pace of U.S. assistance ..... This was one of the most difficultand lonely struggles of my life." Lyndon B. Johnson, The Vantage Point, New York:Holt, Rinehart and Winston, 1971, p. 225.

84 Domestic criticism cut across ideological lines. The mildest criticismwas that it was neither "sound economics, nor honourable politics". Devaluationalso figured in the 1967 elections and contributed to the unpopularity of theCongress party. For political details, see Frankel, op cit, pp. 296-302.

85 Johnson, The Vantage Point, op. cit., p. 229.96 This includes a trip, reports Paarlberg, to the LBJ ranch in Texas where

Subramaniam was especially summoned to give a report on progress in the foodeconomy. Johnson announced his decision to release the next shipment to India (ibid, p. 167).

87 Food in quantities required by India at concessional rates was notavailable from other sources. Requests for wheat went to Canada, Australia,France, the Soviet Union, Mexico and Argentina.

88 However, "in a curious turn of events in the spring of 1968, it suddenlybecame in the US interests to expand food aid shipments; wheat production was up,farm prices were down. Accordingly, the Department of Agriculture and the StateDepartment approached the Indian government to suggest that India take more PL480 wheat than it had already requested" (Paarlberg, op cit, p. 156).

49

How do we judge the impact of the US policy between 1965 to 1967 on India's

agricultural policy? Change can be said to have been caused by external actors

only if the preferences of India's decision makers were different from those of

external agents. One should also distinguish between the change in agricultural

policy and currency devaluation. It is clear that Indian leaders did not want to

devalue the currency on their own. The two ministries concerned with such a

decision, Finance and Commerce, had rejected it outright. Devaluation took place

in the face of counterpreferences of Indian decision-makers.

But what of agricultural policy? Let us look at Subramaniam's account

first:

"...Johnson always had a sense of self-importance. If anything good orimportant was happening in the world, it should be a Johnson initiative.. .hethought the..Indian farmer, the Indian minister and the Indian scientistwere not adequate, and that he should take a hand in the initiation of thisstrategy. He reiterated in speeches that India should adopt this newtechnology, which, as a matter of fact, created problems for me in India.The speeches gave ammunition to those who were attacking me on the groundsthat I was following American advice... .We had already announced and takenthese steps and I had to tell people that President Johnson was telling usnothing new.........The fact that we had to send our requirements offoodgrains to (President Johnson) every month created many difficulties, notonly among the communists but amongst people who were sympathetic toAmerica. Unfortunately, it has to be recognised that America givesgenerously but does not know how to give. I reached the conclusion thatthey would give and still create a feeling of enmity..... ........"(emphasis added)89

Readers of this account and of the chronology outlined above might wonder

what exactly drove the White House policy during 1965-67. Devaluation took place

in June 1966. Other key policy suggestions - including allowing greater private

89 C. Subramaniam, The New Strategy in Agriculture, op cit, pp. 53-4.

50

initiative in the fertiliser sector - had also been accepted by mid-1966. But

the short tether policy continued till the spring of 1967, by which time

agricultural reforms were already close to three years in existence and had gone

through one year of full implementation. Paarlberg documents the case that many

objectives got mixed up - agricultural policy, economic policy, foreign policy -

and argues that ultimately what kept the policy going was India's stance on the

U.S. policy in Vietnam. Indeed, as American pressure increased, the domestic

criticism of the Indian government for its subjugation to the US became

increasingly virulent, which in turn made it imperative for the Indian

government to criticise the US policy in Vietnam even more strongly. Paarlberg

comments that "it was in some ways surprising that Johnson did not understand

this". 90 Chester Bowles, the US ambassador to India, was also convinced that

agricultural policy was not the main reason for the continuance of short tether;

India's foreign policy was. 91

Does this mean, however, that the US played no role in evolution of India's

agricultural policy? Another distinction is necessary -- between the origins of

the new agricultural policy and its implementation. While the origins of the new

agricultural policy, as I have shown, were not affected by the US government

since it was already in place, its implementation was. The reason simply is that

the new agricultural policy was foreign exchange intensive. To recapitulate,

according to the planners, India's export income was expected to go up by Rs 5100

crores between 1966-71 but the foreign exchange required for implementing the

90 ibid, p. 166. It is also surprising, one should add, that Indianplanners did not anticipate some arm-twisting while preparing a plan with a hugesavings and foreign exchange gap.

91 Chestor Bowles, 1971, Promises to Keep, New York: Harper and Row, pp.534-558.

51

plan worth Rs 9100 crores. Thus, in the absence of a resolution of

intrabureaucratic differences, the country was expected to live 180 per cent

beyond its means.

It is here that the World Bank and the US stepped in. Without the foreign

exchange, the implementation of new agricultural policy would have been much

slower. It would not have been impossible for, given the intense struggle in

India in the changed political context, it is unlikely that the Planning

Commission would have forced the Agriculture Ministry to cut its outlay, without

the Commission cutting its own industrial outlays simultaneously. Thus, in the

end, the primary role of the US and the World Bank consisted in facilitating the

implementation of the new agricultural policy by providing resources for

importing fertilisers and other allied inputs upon which depended the success of

the new policy. They did not cause the change.

1.5.1.3 The Role of Ford and Rockefeller Foundations

Since 1954, the Rockefeller Foundation had taken the lead in setting up

institutions of agricultural sciences in India. Supported further by the Ford

Foundation, this effort had led to the development of a substantial pool of

agricultural scientists and qualified manpower by the mid-sixties. 9 2 An

important result of such institution building was that a large infrastructure for

92 For a detailed treatment, see Uma Lele and Arthur Goldsmith, 1987,"The Development of Agricultural Research Capacity: India's Experience with theRockefeller Foundation and its Significance for Africa", Discussion Paper,Development Strategy Division, the World Bank, Typescript. Lele and Goldsmithargue that institution-building was by far the most valuable contribution ofexternal actors to Indian agriculture.

52

conducting research and verifying the results of the new HYV seeds was already in

place when Subramaniam reorganized the institutions of agricultural sciences in

1964 for the new strategy. Eventually, when the potential of the HYV seeds,

particularly those developed by Norman Borlaug of Mexico, was brought to

Subramaniam's notice by the personnel of the Rockefeller Foundation in Delhi,

he was impressed by the scientific evidence presented. Tests under laboratory

conditions in India seemed to confirm the results. 9 3 Next, it was a matter of

testing the new seeds on actual farms. The institutions and manpower which

already existed facilitated the complex scientific and experimental tasks

involved in introducing new technology. Rockefeller Foundation also provided the

resources to import the new seeds later when Subramaniam was faced with foreign

exchange difficulties. 9 4

What conclusions can we draw from this? There is no doubt that HYV seeds

were an entirely new element in the production package in the mid-sixties.

However, it should also be stated that without the political context in which

Subramaniam worked, this fact itself would have been of little consequence. To

repeat, minus the new seeds, which were not available before the mid-sixties,

India's Agriculture ministers had been asking for a generic strategy based on

prices and technolgy since 1956. They were, however, unable to displace Nehru's

institutional view. A Ford Foundation study published in 1959 had supported the

93 Cf. C. Subramaniam in The New Strategy, op cit, pp. 22-3.94 Cf: "For 1966-67 ...... with the foreign exchange provided by the

Rockefeller Foundation, the team was able to buy 18,000 tons of wheat seeds."Ibid, p. 48.

53

view of the Agriculture Ministers. 9 5 Yet the Ford Foundation was unable to

achieve a change in policy. Instead, the outcome was a small pilot project,

known as the Intensive Agriculture District Program (IADP) covering only 13

districts. Moreover, the results of this program were mixed and did not provide

an unambiguous support to the idea of concentrating fertilizers and

organizational effort on areas with assured irrigation.96 The difference in the

mid-sixties was that, while new seeds were available, a crusading Agriculture

Minister had also taken charge, the political context had changed and the

agricultural crisis was deeper.

1.5.2 RURAL SOCIETY AND PUBLIC POLICY

This brings us to the role of the groups within India's countryside. Three

analytically separable issues are involved here: How organized were the social

groups in the countryside? What was their relationship to agricultural policy

per se? And, finally, did they want a price and technology policy as opposed to

an institutional one?

Examining the relationship between agrarian demands and public policy, the

first study of interest groups in Indian polity published by Weiner in 1962

concluded:

"(Agricultural) Policy is debated - often hotly debated - within theMinistries of Community Development and Cooperation, and Food and

95 Government of India, 1959, Report on India's Food Crisis and Steps toMeet it, by the Agricultural Production Team of the Ford Foundation, Delhi:Ministry of Food and Agriculture and Ministry of Community Development andCooperation.

96 D.K. Desai, 1969, "Intensive Agricultural District Programme", Economicand Political Weekly, June 28.

54

Agriculture, the Planning Commission, and the Congress Party. Otherpolitical parties, intellectuals in general, have heatedly discussed therelative merits and defects of ceilings on landholdings and most recently,proposals for cooperative farming. But one could write the history of thepostwar agrarian policy in India, and of the political struggles which haveentered into making such policy, with little or no reference to farmerorganizations. "97

In his study, Weiner looked at two types of rural groups - big landowners

and landlords on the one hand and the small peasantry and the landless on the

other. Neither group had any impact on policy formulation. As for policy

implementation, the former groups were unorganized but powerful enough to defeat

full implementation. And as far as the latter groups are concerned, serious

attempts were made to organize them, but the process did not make enough headway

to ensure that policies aimed at benefitting them were indeed faithfully

implemented. The poor peasantry, thus, neither affected policy formulation nor

policy implementation. Let us see how this process worked.

Landlord influence or pressure, most effective at the local level,

progressively eroded as one moved up the hierarchy, from the local setting to the

central government in Delhi. At the local level, the effectiveness of influence

was not because landlords were "organized". They belonged to many castes and

even when, in a given area, they came from a single caste, there were intense

internecine conflicts. Moreover, by declaring landlords oppressors, the left

nationalist factions at the top echelons of Congress had destroyed the

ideological legitimacy of any landlord groups that might have formed to fight the

government. In the circumstances, a micro-strategy - i.e. individual and

discrete as opposed to group-orchestrated and organized - appears to have been

97 Myron Weiner, 1962, The Politics of Scarcity: Public Pressure andPolitical Response in India, Chicago: University of Chicago Press, p. 149.

55

the strategy of most landlords. Rather than fighting the Congress party as an

organised interest group or class, they simply infiltrated the party to protect

their interests. Their objectives were aided by the fact that the Congress party

needed these "men of power and prestige" to reach out to the countryside. The

declared oppressors were also the "natural leaders" at the local level. This

paradox has by now become a standard academic observation.9 8

Some landlords actively applied pressure in the state capitals, pressure

aimed at shaping land reform legislation in a manner that would permit enough

legal loopholes: giving land ceilings an individual as opposed to a family

definition, raising in the process the effective land ceiling for a given

family.9 9 The mechanism for this was getting elected on a Congress ticket for

the state legislative assemblies and manipulating legislation there. The state

capitals were, however, the uppermost layer of landlord power. New Delhi was

virtually devoid of any significant landlord influence.

What about the small landowners and the landless? Were they organised?

What impact did they have on state policy? Many organizations had attempted to

organise the peasantry, including some led by the ruling Congress party.10 0

98 For a remarkable demonstration of how the Congress leaders viewed thepolitical utility of the landlords, see Paul Brass, 1984, "Division in theCongress and the Rise of Agrarian Interests and Issues in Uttar PradeshPolitics", in John R. Wood, ed., State Politics in Contemporary India, Boulder:Westview Press. Brass has been able to get access to the personal files ofCharan Singh who, for close to three decades after independence, held importantgovernment positions in Uttar Pradesh and in Delhi.

99 See, for example, F. Tomassan Januzzi, 1974, Agrarian Crisis in India:the Case of Bihar, Austin: University of Texas Press.

100 For a description of the peasant movement before 1947, see A.R. Desai,1968, Social Background of Indian Nationalism, Bombay: Popular Prakashan, pp.188-194.

56

These various bodies had their pockets of influence but there were no effective

nationwide peasant organizations. 1 0 1 In areas where the peasant organizations

were strong, they had some impact on policy implementation (land reforms were

better implemented); elsewhere, they had little influence; and in any event, they

were not strong enough to have any impact on policy formulation.

As to why the Indian peasantry could not be made, or did not become, more

rebellious and have an impact on the Indian state, a la the Vietnamese or Chinese

peasantry, is too complex a question to investigate in detail here. Briefly,

given the dependence of peasants on landlords and the structure of landlord

power, the only way peasants could have become a powerful force was if a

political party had mobilized them to counter the power of landlords and provided

them protection. The most powerful party, however, turned out to be dependent on

landlord support. This vicious circle could not be broken, except in the two

states of West Bengal and Kerala which came under Communist influencee. 0 2

Having explicated thus the level of organization of landlords and peasants

and examined their impact on state policy, we are now left with our third

question: what were the attitudes of these groups, organized or unorganized,

towards a price and technology policy? The question has been partly answered by

the discussion so far. If these groups did not matter in policy formulation at

all but made their presence felt only in policy implementation, then their

101 For a study of peasant organizations in South India, see K.C. Alexander,1981, Peasant Organizations in South India, Delhi: Indian Social Institute.

102 Why Communist influence did not expand beyond these states is yetanother difficult question to answer. No studies of why the Communistssucceeded in these states but remained a weak political force nationally areavailable.

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positions, if there were any, on alternative policies were immaterial. Still, it

might be worthwhile to look at what the general picture of attitudes towards

agricultural policy at various layers of the polity was. Weiner sums up:

"One encounters a marked change in attitudes toward agricultural policy asone leaves the office of ministers and planners in New Delhi and enters thehomes of state legislators. At the top, there is support for moresubstantial land reform measures, for greater concentration of publicresources and skilled personnel in limited areas, and for higher ruraltaxes; while at the state and local level, the sentiment is againsttampering with the prevailing land system, is in favour of greater publicinvestment throughout the rural areas and is reluctant to see any majorincreases in taxes. The differences in viewpoint are clearly related todifferences in political position; the distance of the national leadershipfrom rural political pressures disposes them toward a program which theyjustify primarily on economic grounds, while state and local leaders aresensitive to sentiments within constituencies and are therefore disposedtowards policies based on political considerations."103

Two things are obvious. First, a set of attitudes towards policy existed

at the lower levels but there was no organized lobbying. Second, missing even

from the attitudes was a notion of prices and technology; at best, a general

inclination towards higher public investment existed.

SECTION 1.6

CONCLUSIONS

The evidence demonstrates that the sources of change in India's

agricultural strategy in the mid-1960s, which is believed to have led to the

country's agricultural turnaround, lay within the state institutions. The non-

state actors were of two kinds - foreign and domestic. The external actors

facilitated the implementation of the strategy through financial support or by

supplying information to decision makers in a political climate that was more

103 Weiner, op cit, p. 152.

58

conducive to a policy change than before. They could not bring about the

changes in the face of counterpreferences - that is, when the key decision making

elite in India had a view different from that of the external actors as under

Nehru. Once the elite changed substantially, once the counterpreferences turned

weak in the political structure, once the new preferences . close to the view

of the external actors emerged with a power base in the domestic setting, a new

strategy came into being. The external actors leaned against an open door; they

did not force it open.

Mobilized interests (groups or classes) in the civil society did not

determine the change either. Interests in the Indian countryside were, first of

all, not organized enough. Secondly, no groups, whatever the level of

organization, were clamouring for a price and technology strategy. This does

not, however, mean that the civil society did not have any impact on state

policy. While there was no pressure from groups within the society towards

adopting a price and technology strategy, it was abundantly clear that the

institutional strategy was not succeeding and had little chance of success:

classes that the institutional strategy aimed at defeating were precisely the

classes that held power in the countryside. Evolving a more pragmatic

alternative to the institutional strategy, therefore, seemed increasingly

necessary as years under Nehru passed by. But what this alternative should be

was left unspecified by the classes that held power in the villages. The

competing alternatives were envisioned by political leaders within the state

institutions and the struggle for an alternative was essentially fought within

these institutions -- between the various factions of the ruling party along

with their bureaucratic allies. It is worth adding, however, that the state

59

autonomy witnessed at the point of policy origin became considerably diluted over

time as vested interests developed constraining state action and further

evolution of agricultural policy in the 1970s and 1980s. 104

Whether or not such a state-centric view of policy change is relevant to

other parts of the third world may depend on the policy and political system in

question. At present, we simply do not have enough fine-grained case studies, or

what may be termed as "observations", to derive a robust generalization. More

such observations, drawn from other countries, may yield the insights needed for

constructing theoretical maps in the field.

104 Chapters 4-6 of my dissertation deal with the rise of new social forcesas a result of the new state policy and how they constrained evolution ofagricultural policy.

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APPENDIX

LIST OF POLITICAL LEADERS AND OFFICIALS INTERVIEWED

THOSE ASSOCIATED WITH FOOD AND AGRICULTURE MINISTRY

Mr. C. Subramaniam, Food and Agriculture Minister, 1964-67, interview in Madras,

December 14, 1984; Mr. Rao Birendra Singh, Food and Agriculture Minister, 1980-

86, Delhi, September 18, 1986; Mr. C. Sivaraman, Agriculture Secretary, 1965-67,

Madras, December 13, 1984; Mr. G.V.K. Rao, Agriculture Secretary, 1977-79, Delhi,

November 6, 1984; Mr. S.P. Mukherjea, Agriculture Secretary, 1982-84, Delhi,

December 20, 1984; Mr. B.C. Gangopadhyay, Food Secretary, early to mid eighties,

Delhi, December 21, 1984.

THOSE ASSOCIATED WITH THE FINANCE MINISTRY

Mr. Pranab Mukherjea, Finance Minister, 1980-84, interview in Delhi, January 21,

1987; Mr. H.M. Patel, Finance Minister, 1977-78, Delhi, December 2, 1986;

Chowdhry Charan Singh, Finance Minister 1979, Delhi, December 17, 1984; Dr. L.K.

Jha, Finance Secretary in the 1950s, and Principal Secrertary to Prime Minister

Lal Bahadur Shastri (1964-66), Delhi, December 23, 1986; Dr. Ashok Mitra, Chief

Economic Advisor (CEA), mid-1960s, also Chairman of the Agricultural Prices

Commission later, Calcutta, December 25, 1984; Dr. Manmohan Singh, CEA, early

seventies, later, Governor of the Reserve Bank of India and Deputy Chairman of

the Planning Commission, Bombay, December 7, 1984; Dr. Bimal Jalan, CEA, early

eighties, Delhi, December 22, 1984.

THOSE ASSOCIATED WITH THE PLANNING COMMISSION

Dr. D.T. Lakdawala, Deputy Chairman, 1977-79, Interview in Ahmedabad, December 9,

1984; Professor Sukhamoy Chakravarty, Member, early 1970s, August 17, 1984;

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Professor Raj Krishna, Member, 1977-79, Delhi, January 23, 1985; Professor

Hanumantha Rao, Member, Delhi, November 23, 1984.

ii